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Allowable Expenses: Exactly What Can You Deduct to Lower Your Tax Bill?

Everything you need to know about HMRC-approved expenses for freelancers, sole traders, and side hustles. Learn how to legally lower your tax bill.

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TaxWiz Editorial

Tax Content Writer • Modified 2026-04-06

The Golden Rule

Before you try to write off your new shoes, you must understand the HMRC definition of an allowable expense. To be deductible, an expense must be "wholly and exclusively" for the purposes of your business.

The Short Answer

You only pay tax on your PROFIT, not your REVENUE.

If you earn £5,000 but spend £1,000 on software and ads, you only pay tax on the remaining £4,000. Lowering your profit legally is the key to paying less tax.

Working from Home

If you work from your kitchen table or a garden office, you can claim a portion of your household bills. There are two ways to do this:

1. Flat-Rate (Simplified Expenses)

HMRC gives you a fixed monthly allowance based on the number of hours you work at home. This is the "lazy but safe" option.

  • 25–50 hours/month: £10
  • 51–100 hours/month: £18
  • 101+ hours/month: £26

2. Actual-Cost Method

You calculate the percentage of your home used for business (e.g. 1 room out of 5) and claim that exact percentage of your rent, heating, and broadband.

Phone, Laptop, & Software

Most digital workers can recover significant amounts of tax by correctly identifying their equipment costs.

The Equipment Checklist

  • Laptops & Computers: Usually 100% deductible if used for business.
  • Phone Bills: Deduct the business-use percentage of your monthly bill.
  • Software Subscriptions: Adobe, Slack, Zoom, and hosting are all deductible.
  • Marketing: Ads, business cards, and website design costs.
View Full Equipment Guide
In Plain English

What is "Dual-Use Items"?

Be careful with items you use for both work and play (like your personal phone). You can only claim the business portion. If you claim 100% of your personal iPhone but only use it for two client calls a month, HMRC will reject the deduction if audited.
Common Expense Errors
  • Attempting to claim the cost of "looking professional" (regular business clothes are NOT deductible).
  • Claiming 100% of home broadband when you also use it for Netflix and gaming.
  • Forgetting to log small subscriptions that add up to hundreds of pounds a year.

Frequently Asked Questions

Only if you are a professional TV reviewer or filmmaker. Unless it is 'wholly and exclusively' for your business, you cannot claim it.
Almost never. HMRC says you'd have to eat anyway, even if you weren't working. The only exception is if you're on an overnight business trip.
Yes. You can either claim 45p per business mile (the easiest way) or claim for the actual fuel and maintenance costs based on the % of business mileage vs personal mileage.
Technically, yes. HMRC can ask for proof of any expense. A photo or digital scan is perfectly fine—you don't need to keep boxes of paper in your attic.

Tax Disclaimer: TaxWiz provides general educational information and guides for UK residents. While we strive to maintain accuracy for the 2026/27 tax year, tax rules are subject to change. This content does not constitute regulated financial, legal, or tax advice. For complex situations, we strongly recommend consulting a qualified UK accountant. View our full Disclaimer.